Last summer my kids suddenly took an interest in making money. My two oldest started their own small businesses, and the competition was on. Who could make more money – my son who scoured the local golf course for lost balls and sold them for a buck a piece, or my daughter, who made her own earrings and sold them to neighbours for three bucks a pair? (My daughter won, by the way.)
So, here we are in April, and I'm now teaching my kids how to report their business activities on a tax return. Okay, so my idea of quality time with the kids is a little messed up. They'll thank me later. Let me share what they're learning.
1. File on time.
If you're going to owe money when filing your 2010 tax return, make sure you file by the May 2 deadline (the deadline is normally April 30, but it falls on a weekend this year). It's important to file even if you can't pay the taxes owing because you'll be subject to penalties otherwise. The penalty is an automatic 5 per cent of the balance owing plus 1 per cent for each additional full month you're late filing (to a maximum of 12 months).
If you (or your spouse) are reporting self-employment activities on your return, then your filing deadline is extended to June 15. Regardless of your deadline, the taxman will apply interest to any outstanding balance owing if you don't pay it by April 30 (interest on overdue taxes is currently 5 per cent). You may be better off borrowing to pay your taxes if you can borrow at less than 5 per cent.
By the way, the taxman may be willing to waive or cancel any penalties and interest if your tax return is late due to circumstances beyond your control. To request this relief, file Form RC4288 with the Canada Revenue Agency.
2. Check the status of your return.
If you've filed your 2010 tax return and are waiting for a refund, you can check the status of your return online by visiting CRA's website and using the "My Account" service there (or the "Quick Access" service which provides a scaled-back level of information). Alternatively, you can call CRA at 1-800-267-6999 (be patient, the line will be busy this time of year, and be sure to have a copy of your tax return in front of you).
3. Making an adjustment to your return.
So, you've filed your tax return and realize you've made a mistake, missed a deduction or credit, or failed to include all of your income. All you need to do is file an adjustment request. You've got two options here: You can go online to CRA's website and login using the "My Account" service and make the adjustment online (look for the "Change My Return" option); or, you can mail in an adjustment request using Form T1-ADJ (available at cra.gc.ca) for this purpose. Don't make an adjustment to your return until you've received your notice of assessment in the mail for the year in question – otherwise you might just confuse the taxman.
4. Filing an objection to your assessment.
If you disagree with the notice of assessment, your first line of defence is to make a phone call to the CRA to try to resolve the issue. If that fails, consider filing a notice of objection. Although you can do this online using the "My Account" service, my experience has been – particularly for large amounts in dispute – that you'll want to address a letter to the chief of appeals at your local CRA tax services office. The reason? Your objection needs to be well-crafted (I suggest using a tax professional if the amounts are significant), setting out the facts, your reasons for objecting and the reassessment you are seeking, and it will be difficult to be thorough doing this online. When setting out your reasons for objecting, it can be beneficial to cite the tax law and court decisions that support your position. An objection should generally be filed within 90 days of the date on your notice of assessment, or one year from the due date of the tax return in question, whichever is later.
Tim Cestnick